Nasdaq Reports Third Quarter 2023 Results; Broad-Based Growth Drives Solutions Businesses Revenue Acceleration

NEW YORK, Oct. 18, 2023 (GLOBE NEWSWIRE) -- Nasdaq, Inc. (Nasdaq: NDAQ) today reported financial results for the third quarter of 2023.

• Third quarter 2023 net revenues¹ increased 6% compared to the third quarter of 2022. Solutions Businesses² revenues increased 9%, with organic growth³ of 8%.
  
• Annualized Recurring Revenue (ARR)⁴ increased 6% compared to the third quarter of 2022. Annualized SaaS revenues increased 11% and represented 37% of ARR.
  
• Anti-Financial Crime revenue increased 21% compared to the third quarter of 2022. Growth reflects continued Verafin adoption by small and medium banks, an expansion with an existing Tier 2 financial institution, and Surveillance solutions customer growth including Tier 3 banks and retail brokers.
  
• Third quarter 2023 GAAP diluted earnings per share increased 2% compared to the third quarter of 2022. Third quarter 2023 non-GAAP³ diluted earnings per share increased 4% compared to the third quarter of 2022.
  
• Nasdaq generated more than $1.6 billion of free cash flow over the trailing twelve month period.
  
• The company returned $108 million to shareholders in the third quarter of 2023 through dividends.

Third Quarter 2023 Highlights

^{*Net revenues include Other revenues of $10 million in the third quarter of 2023 and $12 million in the third quarter of 2022. Other revenues include revenues associated with the European power trading and clearing business which is pending sale.} 

Adena Friedman, Chair and CEO said, “Our third quarter 2023 results reflect Nasdaq’s solid execution amid a continued dynamic economic and capital markets backdrop. We experienced some improvement in the IPO environment by welcoming marquee IPOs, we continued to broaden our Anti-Financial Crime clientele, and we introduced new innovations to our products and services.

We have completed the antitrust review process for our announced acquisition of Adenza and we expect to close the transaction in the fourth quarter of 2023. With Adenza, we are excited to deepen our client relationships as we expand our role as a leading financial technology provider to the global financial system.”

Ann Dennison, Executive Vice President and CFO said, “We delivered broad-based revenue growth in the third quarter and had particularly strong performance in our Index and Anti-Financial Crime businesses.

With our continued strong cash flows, we are fully prepared to execute our capital plan to pay down debt, continue to increase our dividend, and repurchase shares in the coming quarters to achieve our financial goals with the announced Adenza acquisition.”

FINANCIAL REVIEW

• Third quarter 2023 net revenues were $940 million, an increase of $50 million, or 6%, from $890 million in the prior year period. Net revenues reflected a $47 million, or 5%, positive impact from organic growth, including positive contributions from all Solutions Businesses and a $4 million increase from the impact of changes in FX rates, partially offset by a $1 million decrease from the impact of a divestiture.
  
• Solutions Businesses revenues were $694 million in the third quarter of 2023, an increase of $55 million, or 9% with organic growth of 8%. ARR, which reflects the majority of the Solutions Businesses revenues and excludes the AUM and transaction licensing components of our Index business, increased 6% from the prior year period.
  
• Trading Services net revenues were $236 million in the third quarter of 2023, a decrease of $3 million, or 1%. The decrease reflects a 2% organic decline, partially offset by a positive impact from changes in FX rates.
  
• Third quarter 2023 GAAP operating expenses increased $17 million, or 3%, versus the prior year period. The year-over-year increase primarily reflects higher restructuring expenses associated with the launch of our divisional alignment program in the fourth quarter of 2022, higher employee compensation costs, and an increase in computer operations and data expense partially offset by lower general and administrative expense and a decline in merger and strategic initiatives costs.
  
• Third quarter 2023 non-GAAP operating expenses increased $32 million, or 8% versus the prior year period. The increase primarily reflects increased expenses associated with the continued investment in our people and our businesses to drive long term growth, higher computer operations and data costs and increased general and administrative expense.
  
• The company returned $108 million to shareholders through dividends, and did not repurchase any shares in the third quarter of 2023. As of September 30, 2023, there was $2.0 billion remaining under the board authorized share repurchase program, following an approval by Nasdaq’s board of directors in September 2023 to increase the authorized amount of the share repurchase program to an aggregate of $2.0 billion.
  

2023 EXPENSE AND TAX GUIDANCE UPDATE⁵

• The company is updating its 2023 non-GAAP operating expense guidance to a range of $1,785 million to $1,805 million and its 2023 non-GAAP tax rate guidance to be in the range of 24.5% to 25.5%.
  

STRATEGIC AND BUSINESS UPDATES

• Nasdaq made strong progress in completing the acquisition of Adenza. Nasdaq reached an important milestone in the acquisition of Adenza with the completion of the antitrust review process for the transaction. Nasdaq expects to close the deal in the fourth quarter of 2023 as it expands its capabilities in solving its customers largest challenges.
• Nasdaq expanded its portfolio of market-based solutions to support clients' ability to execute on their environmental sustainability strategies. Nasdaq launched Nasdaq Metrio and Nasdaq eVestment ESG Analytics, designed to enable greater visibility in environmental sustainability metrics and disclosure for corporates, asset owners, and asset managers. Nasdaq’s majority-owned Puro.earth platform, a leading platform for engineered carbon removal, announced a partnership with Xpansiv, in which Puro.earth's CO₂ removal certificates (CORCs) would be listed for trading on Xpansiv's spot marketplace​, CBL.
  
• Anti-Financial Crime achieves continued strong revenue growth. Nasdaq is partnering with a growing number of financial institutions to manage the increasing risks and complexity of financial crime. Surveillance solutions delivered solid growth in new Trade Surveillance customers while Verafin signed 47 new small and medium customers and had an expansion with an existing Tier 2 customer who adopted our complex investigations solution.
  
• Index performance a primary contributor to top-line growth in the quarter. Index revenues increased 15% year-over-year and reflect growth in average AUM in products linked to Nasdaq-100 Indexes and options-based strategies. AUM growth resulted from the combination of strong market performance and $24 billion in net inflows in the trailing-twelve-month period, including $5 billion in net inflows in the third quarter.
  
• Nasdaq achieved a new record for third quarter U.S. cash equities closing cross volumes. U.S. cash equities revenue and revenue capture benefited from third quarter closing cross volumes, including a special rebalance of Nasdaq-100 that had approximately 500 million shares and $70 billion notional traded.
  
• Nasdaq maintained its listings leadership in the U.S and launched a revamped MarketSite. Nasdaq led U.S. exchanges for operating company IPOs with a 84% total win rate during the first nine months of 2023 and has a growing pipeline of companies on file to list on Nasdaq. Year to date through the third quarter, four of the five largest U.S. operating company IPOs by capital raised chose to list with Nasdaq. Seven companies switched to Nasdaq in the third quarter, including Roper Technologies and DoorDash. Nasdaq hosted these leading company listing events at its newly revamped MarketSite in Times Square. The new space includes a state-of-the-art broadcast and production studio and a dedicated IPO Center for first trade celebrations.
  
• Nasdaq continued its innovation in AI and received regulatory approval for its first AI-powered order type​. In September, Nasdaq received SEC approval to launch Dynamic Midpoint Extended Life Order (M-ELO). Dynamic M-ELO uses an AI model to monitor real-time changes to holding periods for M-ELO participants and in testing has achieved an over 30% improvement in average combined volume-weighted order fill rates.
  

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¹ Represents revenues less transaction-based expenses.

² Constitutes revenues from our Capital Access Platforms and Anti-Financial Crime segments and Marketplace Technology business within Market Platforms.

³ Refer to our reconciliations of U.S. GAAP to non-GAAP net income, diluted earnings per share, operating income, operating expenses and organic impacts included in the attached schedules.

⁴ Annualized Recurring Revenue (ARR) for a given period is the annualized revenue derived from subscription contracts with a defined contract value. This excludes contracts that are not recurring, are one-time in nature or where the contract value fluctuates based on defined metrics. ARR is currently one of our key performance metrics to assess the health and trajectory of our recurring business. ARR does not have any standardized definition and is therefore unlikely to be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenue and deferred revenue and is not intended to be combined with or to replace either of those items. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our customers.

⁵ U.S. GAAP operating expense and tax rate guidance are not provided due to the inherent difficulty in quantifying certain amounts due to a variety of factors including the unpredictability in the movement in foreign currency rates, as well as future charges or reversals outside of the normal course of business.

ABOUT NASDAQ

Nasdaq (Nasdaq: NDAQ) is a global technology company serving corporate clients, investment managers, banks, brokers, and exchange operators as they navigate and interact with the global capital markets and the broader financial system. We aspire to deliver world-leading platforms that improve the liquidity, transparency, and integrity of the global economy. Our diverse offering of data, analytics, software, exchange capabilities, and client-centric services enables clients to optimize and execute their business vision with confidence. To learn more about the company, technology solutions and career opportunities, visit us on LinkedIn, on Twitter @Nasdaq, or at www.nasdaq.com/.

NON-GAAP INFORMATION

In addition to disclosing results determined in accordance with U.S. GAAP, Nasdaq also discloses certain non-GAAP results of operations, including, but not limited to, non-GAAP net income attributable to Nasdaq, non-GAAP diluted earnings per share, non-GAAP operating income, and non-GAAP operating expenses, that include certain adjustments or exclude certain charges and gains that are described in the reconciliation table of U.S. GAAP to non-GAAP information provided at the end of this release. Management uses this non-GAAP information internally, along with U.S. GAAP information, in evaluating our performance and in making financial and operational decisions. We believe our presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations. In addition, we believe the presentation of these measures is useful to investors for period-to-period comparisons of results as the items described below in the reconciliation tables do not reflect ongoing operating performance.

These measures are not in accordance with, or an alternative to, U.S. GAAP, and may be different from non-GAAP measures used by other companies. In addition, other companies, including companies in our industry, may calculate such measures differently, which reduces their usefulness as a comparative measure. Investors should not rely on any single financial measure when evaluating our business. This information should be considered as supplemental in nature and is not meant as a substitute for our operating results in accordance with U.S. GAAP. We recommend investors review the U.S. GAAP financial measures included in this earnings release. When viewed in conjunction with our U.S. GAAP results and the accompanying reconciliations, we believe these non-GAAP measures provide greater transparency and a more complete understanding of factors affecting our business than U.S. GAAP measures alone.

We understand that analysts and investors regularly rely on non-GAAP financial measures, such as those noted above, to assess operating performance. We use these measures because they highlight trends more clearly in our business that may not otherwise be apparent when relying solely on U.S. GAAP financial measures, since these measures eliminate from our results specific financial items that have less bearing on our ongoing operating performance.

Organic revenue and expense growth, organic change and organic impact are non-GAAP measures that reflect adjustments for: (i) the impact of period-over-period changes in foreign currency exchange rates, and (ii) the revenues, expenses and operating income associated with acquisitions and divestitures for the twelve month period following the date of the acquisition or divestiture. Reconciliations of these measures are described within the body of this release or in the reconciliation tables at the end of this release.

Foreign exchange impact: In countries with currencies other than the U.S. dollar, revenues and expenses are translated using monthly average exchange rates. Certain discussions in this release isolate the impact of year-over-year foreign currency fluctuations to better measure the comparability of operating results between periods. Operating results excluding the impact of foreign currency fluctuations are calculated by translating the current period’s results by the prior period’s exchange rates.

Divisional alignment program: In October 2022, following our September announcement to realign our segments and leadership, we initiated a divisional alignment program with a focus on realizing the full potential of this structure. In connection with the program, we expect to incur pre-tax charges principally related to employee-related costs, consulting, asset impairments and contract terminations over a two-year period. We expect to achieve benefits in the form of both increased customer engagement and operating efficiencies. Costs related to the divisional alignment program will be recorded as “restructuring” in our consolidated statements of income. We will exclude charges associated with this program for purposes of calculating non-GAAP measures as they are not reflective of ongoing operating performance or comparisons in Nasdaq's performance between periods.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Information set forth in this communication contains forward-looking statements that involve a number of risks and uncertainties. Nasdaq cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information. Such forward-looking statements include, but are not limited to (i) projections relating to our future financial results, total shareholder returns, growth, dividend program, trading volumes, products and services, ability to transition to new business models or implement our new corporate structure, taxes and achievement of synergy targets, (ii) statements about the closing or implementation dates and benefits of certain acquisitions, divestitures and other strategic, restructuring, technology, environmental, de-leveraging and capital allocation initiatives, (iii) statements about our integrations of our recent acquisitions, (iv) statements relating to any litigation or regulatory or government investigation or action to which we are or could become a party, and (v) other statements that are not historical facts. Forward-looking statements involve a number of risks, uncertainties or other factors beyond Nasdaq’s control. These factors include, but are not limited to, Nasdaq’s ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, geopolitical instability, government and industry regulation, interest rate risk, U.S. and global competition. Additionally, with respect to Nasdaq’s proposed acquisition of Adenza, these risks and uncertainties include Nasdaq’s ability to secure regulatory approvals on the terms expected, in a timely manner or at all, Nasdaq’s ability to successfully integrate Adenza’s operations, Nasdaq’s ability to implement its plans, forecasts and other expectations with respect to Adenza’s business after the completion of the transaction and realize expected synergies, the ability to realize the anticipated benefits of the proposed transaction, including the possibility that the expected benefits from the proposed transaction will not be realized or will not be realized within the expected time period, the impact of Adenza’s business model on Nasdaq’s ability to forecast revenue results, disruption from the transaction making it more difficult to maintain business and operational relationships, risks related to diverting management’s attention from Nasdaq’s ongoing business operations, the negative effects of the announcement or the consummation of the proposed transaction on the market price of Nasdaq’s common stock or on Nasdaq’s operating results, significant transaction costs, unknown liabilities, the risk of litigation or regulatory actions related to the proposed transaction, future levels of Nasdaq’s indebtedness, including additional indebtedness that will be incurred in connection with the proposed transaction, and the effect of the announcement or pendency of the transaction on Adenza’s business relationships, operating results, and business generally. Further information on these and other factors are detailed in Nasdaq’s filings with the U.S. Securities and Exchange Commission, including its annual reports on Form 10-K and quarterly reports on Form 10-Q which are available on Nasdaq’s investor relations website at http://ir.nasdaq.com and the SEC’s website at www.sec.gov. Nasdaq undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

WEBSITE DISCLOSURE

Nasdaq intends to use its website, ir.nasdaq.com, as a means for disclosing material non-public information and for complying with SEC Regulation FD and other disclosure obligations.

Media Relations Contacts

Will Briganti
+1.646.964.8169
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David Lurie
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Investor Relations Contact

Ato Garrett
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